Share this article

Advertisement

This Exchange News was brought to you by OKCoin, our preferred Exchange Partner.

Despite the strong downturn seen in the crypto markets, epitomized by Bitcoin’s 50 percent decline that transpired on Mar. 12, the amount of Tether’s USDT stablecoin in existence has exploded.

In fact, according to industry news aggregator Unfolded, the market capitalization of the asset recently surpassed $6 billion, with $1 billion added to this metric in the past two weeks alone. In an industry valued at under $200 billion, such inflows are clearly dramatic.

This begs two questions: 1) what is driving this demand for stablecoins? 2) How will the increase in stablecoin supply affect Bitcoin moving forward?

Why has Tether’s market cap gone vertical?

Sam Bankman-Fried, a former institutional investor turned CEO of both derivative exchange FTX and Bitcoin quant fund Alameda, recently chalked up the phenomenon of the rapidly-increasing stock of USDT to three factors:

Over-the-counter traders, “primarily from Asia,” are looking to acquire USDT. Although Bankman-Fried did not elaborate on this assertion, it is a known fact that Chinese traders use Tether’s solutions because they can’t access the crypto markets in any other way. Some have also suggested that USDT is a good way to move money around the world, even if one doesn’t want to interact with Bitcoin.

All this, he wrote, is “drives up [the price of USDT] and in turn supply, so people create.”

Bullish for Bitcoin

Although a majority of the USDT demands being sparked by sell-side demand rather than investors looking to buy BTC with the stablecoin, the strong increase in blockchain dollars could be a boost to the crypto market in the future.

This was seemingly proven true when BTC rallied as high as $10,500 by mid-February, following the pseudo-indicator he spotted just a month prior to that.

Also, prior to the nearly 50 percent crash in November 2018 that saw BTC plunge from $6,000 to $3,150, the amount of USDT circulating fell by hundreds of millions; also, prior to the majority of 2019’s 330 percent rally was the printing of hundreds of millions worth of the coins.

Major changes in Tether's Market Cap have led Bitcoin's price over the last 1.5 years.

The record-level USDT printing we’re seeing would suggest that Bitcoin is soon going to see a record rally.

Fundamentally, this makes sense; although there are few details as to how one can deposit U.S. dollars and receive USDT in return, the introduction of fiat into this industry through stablecoins should eventually act as a catalyst for Bitcoin’s growth when USDT holders sell their coins for BTC or other digital assets.

This Exchange News was brought to you by OKCoin, our preferred Exchange Partner.

Commitment to Transparency: The author of this article is invested and/or has an interest in one or more assets discussed in this post. CryptoSlate does not endorse any project or asset that may be mentioned or linked to in this article. Please take that into consideration when evaluating the content within this article.

Disclaimer: Our writers' opinions are solely their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate endorse any project that may be mentioned or linked to in this article. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own due diligence before taking any action related to content within this article. Finally, CryptoSlate takes no responsibility should you lose money trading cryptocurrencies.

Places

Stay connected

Company

Disclaimer: By using this website, you agree to our Terms and Conditions and Privacy Policy. CryptoSlate has no affiliation or relationship with any coin, business, project or event unless explicitly stated otherwise. CryptoSlate is only an informational website that provides news about coins, blockchain companies, blockchain products and blockchain events. None of the information you read on CryptoSlate should be taken as investment advice. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own diligence before making any investment decisions. CryptoSlate is not accountable, directly or indirectly, for any damage or loss incurred, alleged or otherwise, in connection to the use or reliance of any content you read on the site.